In a strategic move responding to tepid global demand and surging production outside its coalition, OPEC+ announced on Thursday its decision to postpone the initiation of oil output increases by three months to April, also extending the complete relinquishment of cuts to the end of 2026.
Originally set to begin the reduction of production cuts in October 2024, OPEC+’s plans were hindered by the slowing demand and rising output in non-member states.
OPEC+, an alliance of the Organization of the Petroleum Exporting Countries and allied producers like Russia, is responsible for around half of the world’s oil production. Despite their ongoing production cuts, Brent crude oil prices have lingered mostly between $70 and $80 per barrel throughout the year, recently trading near $72 after dipping below $69 in September 2024.
The group currently withholds approximately 5.86 million barrels per day, equating to about 5.7% of global demand, across multiple agreed stages since 2022. On Thursday, they decided to extend their collective 2 million bpd and the additional 1.65 million bpd voluntary cuts through the end of 2026.
A phased approach will see the unwinding of 2.2 million bpd cuts beginning April 2025, with monthly increments of 138,000 bpd extending over 18 months until September 2026. This is a departure from the previous plan for a 12-month unwinding with increases of 180,000 bpd.
From Energy Aspects, Amrita Sen described the decision as bullish, effectively reducing next year’s oversupply. Nonetheless, market sentiments remain bearish, largely due to expectations that Donald Trump, the former U.S. president, favors low oil prices despite OPEC+’s recent adjustments.
